When Non-Renewal Of Employee's Contract Is For Disciplinary Reasons, Formal Enquiry Is Necessary : Supreme Court

“the form of an order is not its final determinant and the Court can find out the real reason and true character behind terminating/removing an employee”, the Court observed.

A bench of Justice Hima Kohli and Justice Ahsanuddin Amanullah set aside the judgment of the Madhya Pradesh High Court upholding termination of an Assistant Project Coordinator (APC) from her contractual position under the Sarv Shiksha Abhiyan (SSA) program.

The Court observed that the termination order against the appellant was a culmination of two show cause notices against her and was stigmatic despite the state's argument that it was a simple non-renewal of contract.

“The order dated 30.03.2013 was, quite obviously, the culmination of the process set into motion by the two SCNs, which has been overlooked by the Division Bench. The mere non-mention of the background situation or the SCNs in the order dated 30.03.2013 cannot, by itself, be determinative of the nature of the order”, the Court said.

The court referred to judgment in Parshotam Lal Dhingra v. Union of India, 1957 SCC OnLine SC 5 which held that termination based on misconduct or inefficiency amounts to punishment and must follow due process. The Court found that the respondents failed to comply with these requirements, as the termination order had adverse consequences for the appellant, affecting her future employment.

The appellant was appointed as APC on a contractual basis on October 15, 2012, by the State Education Centre, Sehore for one academic session, renewable for two years subject to satisfactory performance in the first year.

However, five days after taking charge, her responsibility for the hostel was withdrawn on January 14, 2013. Subsequently, she was issued two Show Cause Notices (SCNs) on February 14, 2013, and March 15, 2013, for various allegations including dereliction of duty, negligence, and indiscipline. The appellant responded to these SCNs, stating that she was being harassed as she had complained about the hostel.

On March 30, 2013, the District Appointment Committee decided not to renew her contract beyond March 31, 2013, citing her unsatisfactory performance. She filed a writ petition before the HC. On June 20, 2017, the Single Judge quashed the termination order, holding that it was stigmatic in nature and could not have been passed without a formal enquiry.

The Division Bench on February 3, 2020 allowed the state's writ appeal holding that the termination was not stigmatic but a simple non-renewal of a contractual service.

Advocate Prashant Bhushan for the appellant contended that the termination order was stigmatic as it followed the issuance of SCNs that included allegations of misconduct.

Additional Advocate General Nachiketa Joshi for the State of Madhya Pradesh argued that the termination was a simple non-renewal of a contractual service based on unsatisfactory performance.

The Supreme Court noted that the appellant faced complaints about her punctuality. In her defence, she admitted to being late occasionally but argued that she compensated by working late. However, the Court did not accept this excuse.

“It is no justification for the appellant to contend that she was late, but worked late/overtime such that the work did not suffer”, the Court observed.

Regarding complaints regarding her reporting on events in the hostel, the Court pointed out that she was in charge of the hostel for only 5-6 days, which was insufficient time for her to fully understand and report on the issues.

Clause 4 of the RGPSM's General Service Conditions allows for the termination of a contract employee with one month's notice if found inefficient, or immediate termination if the employee engages in "undesirable activities" that degrade the dignity of the Mission.

The Court remarked that the respondents placed themselves in a “Catch-22 situation”, as the termination order dated March 30, 2013, did not comply with either part of Clause 4. If the order was based on inefficiency, one month's notice was required, which was not given. If it was based on "undesirable activities," the order would be stigmatic.

The Division Bench incorrectly concluded that the termination was non-stigmatic and a simple non-renewal of the contract, the Court opined.

Thus, the Court set aside the impugned Judgment and reinstated the Single Judge's judgment with modifications. The appellant was granted notional continuation in service with 50 percent back wages. The Court denied the respondents the liberty to initiate fresh proceedings against her as previously allowed by the Single Judge. However, the respondents may take action in the future if necessary.

Case no. – Civil Appeal No. 9758 of 2024

Case Title – Swati Priyadarshini v. State of Madhya Pradesh & Ors.

Citation : 2024 LiveLaw (SC) 604